Ajay Verma/Reuters
Barely 100 days into the Trump administration, the world is in economic turmoil. Investors who seek safety have stampeded into gold. The price of bullion has increased from US$2,300 an ounce to about US$3,300 over the past year, and Toronto’s Rosenberg Research predicts it could hit US$6,000 within five years. The firm’s lively senior market strategist, CFA Bhawana Chhabra, explains why.
1. “The latest leg of the price rally is very sharp,” Chhabra says. Nevertheless, she expects the surge in bullion to continue over the next few years. That said, Chhabra says investors should “expect a consolidation” in the price—possibly more than one. If US$6,000 sounds bold, consider where the price was in a lull in early 2019: just US$1,300 an ounce.
2. There have been three strong bullion price surges in recent decades—all during upheavals. After then–U.S. President Richard Nixon suspended convertibility by central banks at US$35 an ounce in 1971, the market price soared to US$850 in 1980. The price also soared during the commodities boom from 2000 to 2011 and since the end of 2018, when the trade war under Trump 1.0 broke out.
3. Is gold a commodity like other metals? Chhabra says it’s unique. There is “little industrial demand,” and it’s “part of the human psyche, as it has been a store of value for thousands of years.” Although she acknowledges she’s a bit biased because she’s from India, where gold has a central role in the country’s culture as a symbol of wealth, and a part of marriage and other rituals.
4. Chhabra is also a millennial, age 39, which influences her view of economic upheavals. “The U.S. dollar is the only reserve currency I’ve ever known,” she says. But now there is a lively debate among economists about which country and currency will be dominant in future decades. “The U.S. dollar could lose its power at the margin,” she says. “This is positive for gold prices.”
5. There is a theory that investing in gold producers gives buyers more leverage than investing in bullion. But the S&P/TSX Global Gold index has climbed by only about 40% since 2020, whereas bullion has almost doubled. Rosenberg Research doesn’t recommend specific gold stocks, but Chhabra offers a tip: “Go with producers with mines in stable countries or the whole gold miners’ index.”
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